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Chapter 12: 12-12BE (page 638)

Question: Treasure Land Corporation incurred the following costs in 2017

Cost of laboratory research aimed at discovery of new knowledge

\(120,000

Cost of testing in search for product alternatives

\)100,000

Cost of engineering activity required to advance the design of a product to the manufacturing stage

\(210,000

\)430,000

Prepare the necessary 2017 journal entry or entries for Treasure Land.

Short Answer

Expert verified

Answer

Debiting R&D expense by $430,000 and crediting to cash account with the same amount.

Step by step solution

01

Meaning of R&D Expense

R&D costs are directly related to the research and development of a company's goods or services and any intellectual property created in the process. R&D costs are often incurred when a firm is looking for and developing new goods or services.

02

Journal Entry

Date

Particulars

Debit

Credit

Research and development Expense

$430,000

To Cash

$430,000

(Being entry made to record treasure land)

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